Company: Shekel Brainweigh Ltd.
ASX Ticker: SBW
Sector: Artificial Intelligence 

What Does SBW Do? 

Shekel Brainweigh Ltd. (SBW) offers a suite of automation products that utilize Deep Learning and Artificial Intelligence (AI) to transform the retail and healthcare industry and enhance the consumer experience.

SBW Recent Performance

SBW’s share price sustained a steady decline from ~$0.22 in 2022 to ~$0.08 in 2023 which we believe reflects the general bearish sentiment relative to the small cap tech sector, as demonstrated by the S&P SmallCap 600 Capped Information Technology (sector), which also declined from ~$1,354 to ~$1,048 in the same time frame. Nonetheless, over the past 12 months SBW has shown positive momentum moving towards 12-month highs and making a stable base around ~$0.08.

What is The Sector Thematic? 

AI is one of the fasted growing industries in the history of humanity, with every major corporation now rushing to incorporate AI into their products, as quickly as possible. This is reshaping the behaviour of consumers and their way of collaborating and communicating pre and post sales with retail stores. A complete sector shift towards consumer convenience, data collection, cost efficiencies, safety and hygiene, are all provided by frictionless purchasing, which is pushing retailers to adapt and upgrade their Point of Sales systems. 

Our Best-Case Result for SBW

SBW will become a leader in AI on the ASX due its ‘Product Aware AI’ technology and be acquired by a large retail tech company and or list on the NASDAQ.

SBW Investment Highlights

World First ‘Product Aware AI’ Technology 

We believe SBW has been largely misunderstood by the market to date.  

Whilst SBWs history has been selling weighing technology which generates sales revenue, we believe the larger opportunity lies with their new patented autonomous ‘Product Aware AI’ technology which incorporates AI, on-shelf electronics, software, and algorithms. 

This technology enables frictionless retail automation and autonomy solutions whilst generating machine self-learning and data analytics. These technology advances are now being pursued by some of the largest companies globally (including Amazon), making SBW an acquisition target in our opinion. 

SBW’s AI & Deep Learning technology so far has been incorporated into the below core products: 

  • Smart carts – An ‘all-in-one’ self-checkout device which allows shoppers to scan a product, place the product in the Smart Cart, to which the transaction is then complete. This removes the need to unpack your shopping products from the cart and process through a checkout system as the transaction has already been completed. 
  • Smart Shelving– A shelving system which identifies the quantity and location of individual objects on the shelf in real-time, providing instant feedback and data on inventory and product rotation. This technology is so accurate, that it is able to differentiate between product brands, including a 330ml bottle of Pepsi and a 330ml bottle of Coca Cola. 
  • Innovendi Smart Fridges – 24/7 vending machine ‘fridge’ whereby the door can be unlocked by swiping a credit/debit card, product(s) is then removed, the consumer closes the door and monetary charge is then applied. This enables consumer packed goods vendors to offer products directly to end customers.

Data Collection is the Lifeblood of Major Corporations 

SBWs technology captures data from every point of the product selection and sale process through their core product range. Furthermore, this technology and data collection is so powerful, it will be able to identify if a consumer picked up a can of Pepsi, however put it back and opted for a can of Coca Cola instead. This information offers unparalleled data insight which can be purchased by retailers and product developers, in order to provide critical insights into consumer engagement and behaviours. 

The global big data and business analytics market was valued at circa US $198 billion in 2020. It is estimated it will be worth more than US $684 billion by 2030 (CAGR 13.5%). 

40 Years of Product Development 

Unlike its ASX listed peers, prior to listing in 2018, SBW had already established itself as a global leader for 40 years, developing weighing technology in highly regulated market segments, selling their products to global giants such as G.E Healthcare, Toshiba, Fujitsu, Diebold Nixdorf and others. 

This offers a significant advantage over its peers, as SBW pivots to incorporate AI into its existing technology, which can already be physically purchased and tested by any interested suitors. 

Product Aware AI Technology Solves Many Automation Challenges 

  1. Allows a reduction in staff within retail stores, allowing retailers to operate stores 24/7, providing more convenience to the customers in addition to increasing revenue and decreasing overheads. 
  2. Keeps real-time track of products, making inventory management much more efficient by automatically issuing re-stocking alerts.
  3. Offers insights into the product shelf-life and interactions with consumers. Retailers will make better purchasing decisions and reduce stock waste using these insights.
  4. SBW products have advanced capabilities which communicate with store management, preventing fraud and theft
  5. Provides retailers with consumer data in regards to item movements and purchases 
  6. Increases floor space better utilized for displaying more products which in turn increasing sales. 

Amazon & Wallmart Outdated Technology is SBW’s Big Opportunity 

One of the biggest tech companies in the world ‘Amazon’, which traditionally operates in e-commerce, in 2016 acquired brick and mortar grocery chain provider ‘Whole Foods Market’ for US $13.7 billion, then shortly after in 2018 launched its own chain of ‘Amazon Go’ convenience stores in the U.S. and the U.K. These stores are designed to be completely autonomous. ‘Amazon Go’ provides a perfect testing ground for its frictionless retail, which can then be adopted in its larger retail stores. Evidence of this can be seen in 2021 when Amazon announced they were rolling out ‘Just Walk Out’ technology in some of its ‘Whole Foods Market’ stores.

Further, Amazon’s rival Walmart announced a partnership with Microsoft in 2018. The companies released few details, but a Reuters report earlier has indicated they plan to build a competitor to Amazon Go.

We view this as a significant opportunity for SBW, given its AI-driven technology which is far more accurate, provides productive store data analytics and is less data-intensive than camera-based store-tracking tech found in Amazon Go stores and other autonomous retail outlets. Challenges with camera tracking include lighting conditions, line of sight impairments, small item tracking issues and more. On top of this, computing so much visual data is expensive and cumbersome.

Accelerated Uptake Due to the Pandemic 

Governments and consumers have become extremely cautious of the safety and hygiene factors after the pandemic. Due to this, autonomous retail formats are seeing an accelerated adoption rate as they assist in providing a contactless shopping experience. 

Patented Technology 

Why doesn’t another company just use the same Product Aware Surface Technology if it is so good? To prevent this, SBW has a suite of intellectual property rights, including patents, in relation to its core load cell products and related technology. These patents are granted in several countries including, US, China, UK, Canada, Europe and Israel. 

SBW Also Has Strong Company Fundamentals 

Experienced Management Team 

With a deep connection to the retail sector, technology systems and company growth, SBW’s team has significant experience and the ability to transform SBW into a major organisation. Key board members are highlighted below:

  • Non-Executive Director – Beth Kaplan: Has held a number of directorship and managerial roles for retail and technology companies with multi-billion-dollar market capitalisation. Currently Ms. Kaplan serves as director for US based public companies, Howard Hughes Corporation ($5.9B market cap) &  Crocs Inc. ($10.7B market cap). 
  • CEO & Executive Chairman – Arik Schor: Served as CEO of Tnuva Group from 2009 to 2016, the largest food conglomerate in Israel with annual revenues over $2B, 6,000 employees and operates in 32 countries. Prior to this, Mr. Schor was the CEO Officer of Holga Kimberly which is a $1.5B market cap company (a subsidiary of Kimberly Clarke $62B market cap).
  • External Director – Tzipi Avioz: 10 years’ experience at Woolworths Limited in Australia ($40B market cap) where her last role was serving as Group Head for Digital Commerce and Contact Centre and.
  • Non-Executive Director – Michael Hughs:  Has More than 30 years’ experience across the finance sector including investment management, investor relations and commercial banking. Mr Hughes has a long-time involvement with the ASX having directed and managed many listed companies.

Directors Have Skin In The Game

Directors represent ~23% of the register, largely driven by Ms. Kaplan who represents Axcel Partners. Moreover, Axcel has bought shares on market, at a value of $555,000 for $0.35 per share. This is a ~77% premium to the current share price (0.08). 

Tight Register 

SBW boasts an extremely tight capital structure, with the Top 20 shareholders holding ~83% of the register. The volume of shares being traded is very low, which we view as a positive, as any meaningful news has the potential to move the share price significantly, and due to illiquidity of shares people wanting to buy in will have to pay a large premium. 

Key Substantial Shareholders & Financial Support 

The top three shareholders, (founder of SBW)  Axcel Partners, Consepta Ltd & Agricultural Cooperative Society, collectively make up ~50% of the register.

Since SBW listed in 2018, these key shareholders have jointly maintained ~110 million shares, demonstrating a long-term view of the company and its prospects. 

Due to the tight structure and illiquidity of the register, these key shareholders cannot easily sell their positions and therefore must see SBW succeed in order to achieve a return on their investment. 

Moreover, these key shareholders continue to financially support SBW via loan agreement. We do not believe this debt to be ‘risky’ as the key shareholders have a vested interested in seeing SBW succeed, so therefore would not call on the debt early.

Share Price Catalysts 

In the past six months, AI leader Nvidia (listed on the NASDAQ), has seen its share price grow by 67% taking its market cap to an astounding US $1.97T. This growth has lit a fire under US based AI stocks, which the ASX is now beginning to reap the benefits of and see some early sector tailwinds. Big names on the ASX such as BRN have finally started to show some signs of life, with its share price growing from $0.16 to $0.49 in under a month.

We believe once the market understands the significance of SBWs ‘Product Aware AI’ technology and see sentiment towards AI focused stocks begin to move, it will be able to catch the tail winds of this sector movement, and realise some share price appreciation.  

Investment Risks 

  1. Dilution – Working capital funding has been secured via a US $6.25m loan & option agreement. Conversion beforehand at contracted terms (25% discount to the VWAP from May 2023) remains a risk in terms of dilution.
  2. Volatility – AI shares tend to be volatile. This means share prices can fluctuate significantly in response to economic or market factors. 
  3. Sales risk – Macro factors in the market including a recession can cause a reduction in spending on new technology, affecting SBW’s ability to make sales.
  4. Competition Risk – The technology industry is a competitive space. Other companies may try enter into the sector with new and innovative technologies